DOD: Cost-Benefit Analysis Required for Insourcing The Defense Department has ordered new controls on insourcing, including requiring a cost-benefit analysis before contractor positions are brought in-house. In a memo, the department said the deputy secretary must approve any insourcing that would exceed current ceilings on civilian DOD employees. The new directive is a further step back from the insourcing initiative that the Obama administration launched with great fanfare nearly two years ago. Defense Secretary Robert Gates has said that replacing contractors with federal employees did not produce the anticipated savings. The March 15 memo was signed by Ashton Carter, undersecretary for acquisition, technology and logistics, and Robert Hale, DOD’s chief financial officer. It says the department plans to add about 10,000 civilian employees to its acquisition workforce by 2015. “Additional in-sourcing of acquisition functions may be considered,” the memo says. “However, all insourcing will be on a case-by-case basis, after careful consideration of critical need, whether a function is inherently governmental, and benefit demonstrated by a cost-benefit analysis.” The Professional Services Council, a contractor group that has been critical of the insourcing initiative, applauded the new guidance. “This is an important step toward adding much needed strategic focus and discipline around insourcing” PSC president Stan Soloway said. “We have long supported the department’s efforts to build critical skills but have become increasingly concerned as those efforts veered off track, as most of the work identified for insourcing falls outside of ‘critical skills’ and is based on questionable cost and savings assumptions.” The Army, which has led the way in insourcing, imposed similar restrictions earlier this year. All Army insourcing actions must be approved by the secretary.